NBHC

We rate National Bank Holdings Corp (NBHC) as a Reduce with a composite score of 47.1/100 at a current price of $40.16. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in stability (54th percentile) and momentum (51th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (33th percentile) and investment (47th percentile) tempers our overall conviction. We assign a Narrow Moat rating (42/100), Low uncertainty, and Standard capital allocation.

Key items to watch: sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is widening, which provides additional comfort in the durability of the competitive position.

National Bank Holdings Corp holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 47.1/100 places it at rank #2465 in our full 7,333-stock universe. At $1.5B in market capitalization, National Bank Holdings Corp is a small-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 847%, though momentum at the 51th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 81% (+4.5pp vs sector) narrow to operating margins of 327% (+309.7pp vs sector) and net margins of 209.2%, yielding a gross-to-net conversion rate of 258%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $40.16, National Bank Holdings Corp is trading near fair value based on current fundamentals. Our value factor score of 49/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 15.1x (a 27% premium to the sector median of 11.9x), EV/EBITDA of 8.9x (near the sector median), P/B of 1.4x, P/S of 13.4x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Low uncertainty rating to National Bank Holdings Corp. The company exhibits strong financial stability with a beta of 0.79, conservative leverage (6% D/E), and a stability factor in the 54th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: weak quality scores (33th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 54th percentile and quality factor at the 33th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 81% provide a buffer against cost pressures; conservative leverage (6% D/E) limits balance sheet risk; a 3.05% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate National Bank Holdings Corp's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 9.2%, and the balance sheet is managed within acceptable parameters (D/E: 6%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; National Bank Holdings Corp falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 3.05% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, National Bank Holdings Corp receives a Reduce rating with a composite score of 47.1/100 (rank #2465 of 7,333). Our quantitative framework assigns a Narrow Moat (42/100, trend: widening), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 47/100.

Our analysis does not support a constructive view on National Bank Holdings Corp at this time. The combination of the current quantitative profile, low uncertainty, and standard capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.